Wild day for Obamacare: Appeals court rulings conflict

Two federal appeals courts issued contradictory rulings on Obamacare subsidies within a few hours Tuesday, one delivering a victory and the other a major blow to the White House in a chaotic legal fight that will determine whether millions of Americans can get subsidized coverage through HealthCare.gov.

First, the U.S. Court of Appeals for the D.C. Circuit in a 2-1 decision said the insurance subsidies can’t be awarded through the 36 federal-run exchanges, that they can only flow through the state-run markets. Hours later, the Fourth Circuit court ruled 3-0 that people can draw on the subsidies in both kinds of exchanges. The divergent opinions set up a clash that could eventually end up at the Supreme Court — and reverberate through the fall campaign.

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The ruling against the subsidies is the second Obamacare strike against the White House in less than a month, after it lost in the Supreme Court’s Hobby Lobby ruling on birth control coverage. But unlike the contraception rule, which is a small piece of the health law, the subsidies go to the heart of coverage expansion in the Affordable Care Act. This case also poses different legal questions from the 2012 challenge to the law’s individual mandate, which the court ruled was constitutional.

For now, no one will have their subsidies cut off while the legal battle continues. The Obama administration said it will appeal the D.C. ruling on Halbig v. Burwell by asking for an en banc review involving the full panel. “We are confident in the legal case that the Department of Justice will be making,” said White House press secretary Josh Earnest. The plaintiffs in the fourth circuit’s King v. Burwell in Virginia haven’t yet said what they’ll do next.

The legal battle arises partly because of ambiguity in the long and complex statute. It’s also another outgrowth of the bitter politics surrounding President Barack Obama’s crowning domestic legislation. States were originally expected to run their own exchanges, but as Republican governors refused to implement the health law and some Democratic states couldn’t handle the technical complexity of a state exchange, most opted for using the federal HealthCare.gov instead.

Opponents of the health law said that if the subsidies are ultimately cut off from the federal exchanges, it’s the administration’s own fault.

“If Halbig results in people losing health-insurance subsidies, the blame lies with a president who recklessly offered millions of Americans tens of billions of dollars in subsidies he had no authority to offer, that could vanish with a single court ruling,” said the Cato Institute’s Michael Cannon, who has been involved in the legal battle.

Unlike other major Obamacare challenges, this controversy hinges on just a few words in a lengthy law. The D.C. Circuit concluded — “frankly, with reluctance,” as one judge wrote — that the statute narrowly but explicitly authorizes only state-run exchange subsidies, no matter what Congress may have intended. The Richmond court saw ambiguity in the text, but said the IRS had the power to interpret the statute broadly as it set the rules.

The Department of Justice said it would seek a review of the decision it lost.

“We believe that this decision is incorrect, inconsistent with Congressional intent, different from previous rulings, and at odds with the goal of the law: to make health care affordable no matter where people live,” a DOJ spokeswoman said.

The Halbig and King cases are two of several lawsuits in which individuals or state officials are challenging the Obama administration’s authority to grant subsidies in the form of tax credits to low- and middle-income Americans buying health coverage through the federal-run exchanges.

Both sides claim that a full reading of the 2010 health care law—and Congress’ intent when passing it—supports their own interpretation. The plaintiffs argue that Congress intended to motivate the states to run their own exchanges by tying the subsidies to them. The administration says that would have gone against the whole goal of the law: to help Americans find affordable health coverage.